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Bondora portfolio

Times have been turbulent for Bondora for a while, and as someone who keeps an eye out for all kinds of changes in P2P investing, even I have managed to lose track of what Bondora is attempting to do. A while back I eliminated my private investing portfolio in Bondora, largely due to tax reasons, but I was still rather optimistic about their long term outlook, which meant that I built a company portfolio that I planned to run with a rather conservative strategy as a part of my p2p portfolio.

To achieve a conservative portfolio I used an API solution that was self built, and picked loans that were only Estonian, and fell into the more conservative segment, focusing on loans up to C credit group. Within a couple of months I managed to build the portfolio up to about 5000 euros, and while the returns were on the lower end of my portfolio due to the changed risk evaluation policies I was OK with this, as I believed in the long term stability of the portfolio.

Then came all the changes. Firstly the DCA, which, while I understand was necessary was a PR disaster, even though we tried to do our best to help information spread through the investing podcast that we run. The final nail in the coffin, however, is turning out to be the thing that a lot of active investors, including myself, predicted would be the biggest issue – API investments cannot compete against portfolio managers, meaning as long as enough people turn on their autobidders being an active investor is close to impossible.

What this means, is that since the middle of October there has been a steep drop-off for loans, and as such, I have not received a single loan through API bids since October the 13th. Asking around, it seems like other investors are in the same boat as well, leaving only two options available. 1) turning on the automatic portfolio manager or 2) actively trading on the secondary market.

Fundamentally, I do not wish to passively invest in Bondora, which means that if I do turn on the autobidder, it will be just with some play money to test it. I’m just so confused at the direction that Bondora is moving towards – why build all the tools necessary for active investing and then actually make active investing impossible?

Unless the plan was to make API bidding viable for the secondary market only (where it seems to be quite successful). In that case, good luck to all the people making great deals on the secondary market, but I feel the amount of money I currently have in Bondora is not worth the effort of building up the level of statistical modelling which would be required for trading well on the secondary market.

Which means, I’ve slowly started to sell off my company portfolio’s loans, and will continue to do so until I manage to sell most of what I can at value, leaving maybe a small amount of money circulating to see what’s happening. Kind of sad, seeing as Bondora was the portal I started with, and I fundamentally liked their business ideas, but I think my investing ideals have just drifted very far apart from what they’re doing now. Lucky for me, though, there are multiple other viable offers on the market, meaning there is no reason for the money to sit idle!

For years I’ve been investing as a private person in Bondora, so today when I finally got to registering my business account, then I realised that I didn’t actually know how to do that since there isn’t an easy button somewhere and quickly glancing through the informational material didn’t give me the result (the guide is actually accessible here).

I’m assuming that at least one person has had the same problem as me, so here is a short overview of how it goes: (I just e-mailed investor@bondora.com and they were nice enough to hold my hand through the whole process).

Step 1: Must have a verified personal account

I actually registered with Bondora such a long time ago, that I had never gone through the whole verification process as a private person. It’s just two easy steps – they want to see a photo of your ID (legible, has all relevant details) + a copy of a bill that’s listed to your address and includes your name (this might be a problem for people who rent, or who don’t have a lot of bills to pay, to substitute this you can also order a PIN to be mailed to you).

After you’ve presented the relevant documents you have to verify your bank account – I didn’t need to do that anymore, but a 1€ deposit will do it. Verifying the documents took like 15 minutes – maybe because I e-mailed them beforehand, so I’m not sure how representative this is of the general user experience.

Step 2: Provide information about your company

This step just means e-mailing relevant information to Bondora, there is no easy “send into here” button, you just e-mail them all the details about your company (owners, registration number, address, data from the business registry (RIK in Estonia) and info about the beneficiaries).

After this you just have to wait until they have looked over the documents and add a business account to your ordinary account. You can access the account afterwards in the top right corner (where your name is) and easily switch between different accounts. You just have to log in and out to make it work.

Step 3: Invest!

Once your account is registered, you can add money to your account (remember business account for the business profile!) and start investing when the money is there. Overall it was a reasonably easy process, customer service was pretty helpful and I’ve already made my first bids from my business account.

There has been a significant amount of drama happening around Bondora this month.The new passive portfolio manager caused a fair bit of controversy and the API is still in testing so many investors have at least temporarily reduced investments. For me, the old PM is still active and can give out about 4K worth of loans, so I’m hoping that will tide me over until you can use the API to invest. This means that all the money I transferred into social lending this month went into Moneyzen and Estateguru. However, my Bondora portfolio is big enough that it just does its own thing even without adding in money.

Due to not adding much money into Bondora for the last couple of months, you can see the 60+ defaults becoming a more significant part of my portfolio. There are two reasons for this – firstly that the loans from the big growth months from last year are now defaulting, and the loan pieces that are defaulting at this point are starting to be the 15-25€ pieces as opposed to the 5€ pieces that used to default earlier. However, despite the continuously increasing defaults this was another record month for me in terms of interest earned:

Total interest earned for October ended up being 108,29€, meaning that this year is likely to end at 110€/month from Bondora, so I’m quite happy with the overall result already due to how much less I’ve invested into Bondora this year compared to what I had originally planned. Adding in Estateguru and Moneyzen, my P2P monthly earnings come just close to 125€.

I plan to add just a bit more money into Bondora this year to finish December with a total of 5K euros in deposits. My account will turn 3 years old in December and I guess I’ll have to write a longer overview into returns from Bondora and whether or not it’s been performing as I wished it to.

Another topic that’s starting to become more and more interesting as my portfolio ages is the recovery rate. I see pretty decent movement from recovery every month, and at this point I’m waiting for my monthly recovery to reach 20€/month. Should probably realistically happen mid-way through next spring. Recovery for last months looks like this:

Overall, I’d say, keep calm and wait for the API. I’ll probably be looking into it soon as well, once other third parties have made their solutions accessible. Overall, I was thinking about it a bit and I don’t even need anything super complex. I’d probably set my PM to just what I had now – AA, A, B &C loans OR any kind of Estonian loan. Not rocket science, so I’d assume that with the help of some friends working in IT it should be doable once more details about how the API works come apparent (like how exactly do the loans get distributed between bids!)

September wasn’t a very active month for me in Bondora. Due to having extra expenses (plane tickets!), then I only added ~20€ into Bondora this month. I’m on the wait to see what Bondora will announce for the new market system before adding in more money, since I’m 80% decided on starting a second Bondora portfolio under a business account. That still depends on what Bondora is set to do with their investments.

As you can see, a sad moment has arrived – the 60+ overdue has finally hit 1000€. I’ll be honest, it hurts a bit to look at 😉 . Especially, knowing the upcoming changes for how overdue loans will be handled. Still, I’m currently enjoying some digging around the dataset so I’ll be taking a longer look into defaults and recovery soon.

The ‘bump’ of adding in some more money at the end of summer hit, making September a record month – total interest earned was 104,7€. Hitting 120€ by the end of the year from just Bondora is looking very unlikely, but I’m not too bothered by it since I’ve just added a bit of money into Estateguru, so that compensates for overall social lending.

As I said, not much money was added, so there is a bit of a drop-off. However, you can clearly see the impact of the new rating system by how the defaults are dropping off a bit. It of course hurts seeing 25€ pieces default, but I don’t track them too much.

Recovery is still going nice and slow. I’ll look into that a bit more soon, so I won’t go into more detail now. Overall, looking forward to new announcements! (Likely that they will happen after the Lendit conference though, so still a while to wait.)